With respect to Q1 FY ’25, we expect trailing 12-month billings growth to be approximately 8%. To provide some context before turning to guidance, as I mentioned, annual recurring revenue ended FY ’24 at 10% growth. We expect ARR growth to accelerate in FY ’25, particularly in the second half. Our guidance reflects this gradual growth acceleration. Importantly, we have made a change from monthly to daily revenue recognition, which creates a shift in revenue out of Q1 to the rest of the year. We expect to continue to expand operating margin in what will be our third year of non-GAAP profitability, and our EPS guidance for the first time includes a non-GAAP tax rate of 23%. So, looking at our guidance for the first quarter fiscal 2025, we expect revenue in the range of $110.5 million to $112.5 million, representing a growth rate of 7% to 9%, and net income per diluted share attributable to PagerDuty, Inc., in the range of $0.12 to $0.13.
This implies an operating margin of 9% to 10%. For the full fiscal year 2025, we expect revenue in the range of $470 million to $478 million, representing a growth rate of 9% to 11%, and net income per diluted share attributable to PageDuty, Inc., in the range of $0.65 to $0.70. This implies an operating margin of 13% to 14%. Before moving to questions, I would like to provide assistance with modeling FY ’25. We changed from ratably recognizing subscription revenue on a monthly basis to a daily basis in FY ’25. The impact of this is approximately $3 million less revenue in Q1, and $3 million higher revenue in the remainder of the year due to Q1 having fewer days. Our EPS guidance now incorporates a non-GAAP tax rate of 23% for each quarter of FY ’25, which represents approximately $0.04 of EPS in Q1, and $0.21 in FY ’25.
Non-GAAP gross margin is expected to remain within our target range of 84% to 86%, but trend toward the low end of the range as we invest in our services capacity for enterprise customers. For reference, Q1 of the prior fiscal year incremental ARR was $12 million. And as a reminder, interest payments on our 2028 convertible notes are made semi-annually in arrears in Q1 and Q3. The business momentum we carry into FY ’25 is a direct result of the long-term oriented investments in the Operations Cloud to solve the complex operational issues of large enterprises, accelerating our move upmarket. The annual increase in multi-product customer ARR and multi-year commitments, the increasing volume of large deals, and improved annualized gross retention this past quarter gives me confidence in our ability to accelerate growth this year.
With that, I will open up the call for Q&A.
A – Tony Righetti: Thank you, Howard. As we turn to questions, we’ll hear first from Sanjit Singh. Sanjit, if you go ahead and unmute.
Sanjit Singh: Great. Can you hear me?
Tony Righetti: Go ahead.
Sanjit Singh: Awesome. Thank you so much. Thank you for taking the question. Jennifer, in the sort of rubric or the topic of things that is under the team’s control, definitely on the operating margin side and the profitability side of the equation, you guys had a pretty fantastic year. I wanted to get your assessment, when you look back at fiscal year ’24 on like the sales execution side, if we look at sort of the slowdown in growth, was that just — we just put it on macro or were there other things where the team could execute better? And how does that inform your growth expectations going into next year? Because I think you mentioned like sales productivity might be improving as we exited this fiscal year, going into fiscal year ’25. So just wanted to get just your assessment of where execution is strong and where execution could be better.
Jennifer Tejada: Sure. Well, first of all, I appreciate the comment. We have been working for several years to put a structural set of programs in place to improve the efficiency and the operational resilience of the company through both profitability and cash flow. And I think we’ve done a good job there of controlling the controllables. In addition, we also invested quite a bit of time in enabling the salesforce to move up market selling to a new type of buyers. So, one of the shifts we saw in the macro was this move away from bottoms-up buying through the developer community to a top-down, more centralized, procurement-led purchasing process. And we had to enable the salesforce to manage that effectively. Fortunately, we’re in sort of the right place at the right time with the Operations Cloud platform, which is really directed towards business objectives of improving productivity, improving cost efficiency while increasing time to market, and protecting the customer experience and growth.
I think what we really saw in the first half of the year was a pretty significant change in the demand signal as customers retrenched thinking through their headcount investments, their budget investments. But what we’ve seen stabilized towards the back half of the year is more confidence around the budget envelope that our enterprise customers have to work within, and more of a willingness to engage with us in multi-year, multiproduct deals. And you can see that in some of the examples that we’ve mentioned. And we’ve seen a real improvement and sort of shift in the sales organization’s behavior to go from that transactional created in quarter sort of expansion motion to really a top-down, value-driven sales motion that really supports and underpins the better together story for the platform.
And so, I would say it’s less about execution and more about making that transition, which was where the requirement was accelerated by the change in the macro.
Sanjit Singh: That’s great context…
